The Home Equity Theft Reporter

Welcome to The Home Equity Theft Reporter, a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it.

Saturday, April 04, 2009

Organizers of Orlando-based Homestead Protection Services LLC have agreed to disband the operation and pay more than $25,000 to settle a state investigation into suspect "foreclosure-rescue" services, state authorities said Friday. Homestead's owners also agreed to refrain from future violations of the state's deceptive-trade-practices law, according to the Attorney General's Office. The company will pay $20,000 in restitution to consumers and $5,000 to cover the costs of the probe. State investigators said Homestead charged up-front fees ranging from $997 to $3,500 to help consumers try to get out of mortgage trouble. The state also found Homestead misled consumers about refund policies and the services that it would actually provide. Investigators fielded a number of complaints about false promises and refund denials by the company.

South Florida Region Leveled By Hurricane Andrew Now Being Devastated By Foreclosures

In Homestead, Florida, The Associated Press reports:

Seventeen years after Hurricane Andrew leveled much of southern Miami-Dade County, a different kind of storm is devastating households here: foreclosures. In certain ZIP codes in places like Homestead and Florida City, around 25 percent of the homes are in one stage of foreclosure or another. Countless others were built by developers and sit vacant in ghostly subdivisions, with not a buyer in sight.(1)

Connecticut Contractor Charged With Defrauding Couple Out Of $66K For Home Improvement Work

In Trumbell, Connecticut, The Connecticut Post reports:

A Monroe contractor has been charged with defrauding a local couple of $66,000 for a home-improvement project. Jeffrey Picataggio, 40, of Countryside Drive, surrendered to police Monday after being told there was a warrant for his arrest. He was charged with two counts of second-degree forgery and released from custody after posting $10,000 bond.

According to police, Picataggio, owner of Pic's Carpentry Design, was hired Jan. 8 by a local couple to add a second-floor room to their Church Hill Road home. Picataggio, however, allegedly submitted duplicate bills for work he never performed, including electrical work, and did work that violated building codes. At one point, police said, he drilled holes in the roof of the couple's home and then told them it was leaking in an attempt to sell them a new roof.

The couple ended up paying Picataggio $66,000 and then another $35,000 to another contractor to fix the work Picataggio was supposed to have done, police said.

Contractor Charged With Home Improvement Fraud As Katrina Victims Say They're Out Thousands

In Lafourche Parish, Louisiana, WWL-TV reports:

Close to a dozen homeowners struggling to rebuild after Hurricane Katrina said they are out hundreds of thousands of dollars because of the work – and lack of work – by one contractor who is now sitting in jail.

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Jennifer Solar, an investigator with the Lafourche Sheriff's Department, charged [contractor Don Fisher] with home improvement fraud, which is a felony, and exploitation of the infirmed, which is taking advantage of someone over the age of 60. Solar said subcontractor Dave Schwab filed a forgery charge against Fisher. Solar said Fisher fraudulently used Schwab's name to get a building permit for the Lutz home.

Local Realtors are lauding new changes to Washington's year-old distressed-property law. Last year's law aimed to protect people in danger of losing their homes to foreclosure from getting ripped off by people offering to help. But real estate agents said the rules subjected them to all sorts of unfair liability. The new law, which Gov. Chris Gregoire signed earlier this week, exempts agents from the definition of "distressed home consultant" when doing their normal jobs.

Screw-Ups, Alleged Fraud Leave Two Homeowners Facing Loss Of Homes

In two separate stories, carelessness on the part of a loan servicer and alleged fraud leave two homeowners under the threat of losing their homes.

Yuma, California: It's a story that echos all across the country. Homeowners are fighting foreclosure. One local woman says she's been making her house payments, but her mortgage company is threatening to put her out on the street. For more, seeLocal Woman Gets Mortgage Run-Around, Fears Foreclosure.

Louisville, Kentucky: All Angela Porter wanted was a first house for her family. Now facing eviction, what she got was a nightmare, set into motion when she met Wavy Curtis Shain. For more, see Local family caught in mortgage mess.

Hucksters and con men seeking to cheat beleaguered homeowners with fake mortgage refinance schemes face increased likelihood of prosecution, according to a new campaign announced Wednesday in San Francisco.

"Vulnerable residents desperate for relief should not be preyed upon," said District Attorney Kamala Harris, speaking to a room of seniors at the Bayview Multi-Purpose Senior Center. [...] Harris and assessor Phil Ting said they had put together a public education program to distribute leaflets and deliver lectures to community groups about the growing problem of door-t0-door hustlers who claim to be able to avert foreclosures but do nothing but pressure residents into large fees for worthless services.

Ohio Loan Modification Scam Purports To Be Part Of State's "Save The Dream" Program To Clip Homeowners Seeking Mortgage Help

In Cleveland, Ohio, The Plain Dealer reports:

ESOP, a Cleveland nonprofit that helps homeowners avoid foreclosure, says it has received word of a new foreclosure rescue scam. In this one, the scammer claims to be a staffer in Gov. Ted Strickland's Save The Dream program. The scammer tries to charge homeowners $1,500 for foreclosure rescue help.

Friday, April 03, 2009

Second Mortgages A Major Sticking Point In Effort To Help Homeowners Avoid Foreclosure As Subordinate Lienholders Fight To Keep From Getting Stiffed

The Wall Street Journal reports:

The Obama administration's $75 billion effort to help troubled homeowners avoid foreclosure has hit a stumbling block: a fight over how to aid borrowers who have more than one home loan. The Treasury Department, scrambling to address the problem, is trying to persuade lenders to forgive or greatly reduce so-called second liens. But that effort has sparked a fight between investors who own securities backed by first mortgages and banks that hold second mortgages over how losses should be shared.

A Fair Oaks-based company called 2nd Chance Negotiations Inc. has been ordered by the California Departments of Corporations and Real Estate to stop performing loan modification services. [...] The company solicited financially stressed borrowers, and, in exchange for an upfront fee, promised them they would negotiate with the borrower’s lender to modify the terms of the borrower’s loan. However, the joint investigation established that 2nd Chance Negotiations was not licensed and/or legally authorized to perform the promised services or collect advance fees, the state says.

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In general, and with limited exceptions, only licensed real estate brokers and California attorneys operating as lawyers within the scope of their license, may collect advance fees. Real estate brokers must have their advance fee agreement reviewed and sanctioned by the DRE prior to its use.

A 43-year-old man pleaded not guilty [last week] to numerous counts in an alleged real estate fraud case in which the perpetrators allegedly filed deeds under the guise of a religious order. Terry Lee Herron, 43, was charged with conspiracy to file false documents and conspiracy to commit forgery, said Deputy District Attorney Marlene Coyne.

Herron also faces 12 counts of filing false documents and six of forging documents, Coyne said. The original defendant in the case, Maurice Antoine Simmons, 31, was also charged with two conspiracy counts, Coyne said. Simmons was accused last year of taking blank grant deeds and filling them out as if he owned the properties -- a condominium in San Diego and five homes in Chula Vista, according to Coyne. She said three properties were owned by banks and two by private individuals.

Authorities said they have noticed a trend in which people claim ownership of properties by filing bogus grant deeds. The fraudulent owners then move people into the vacant or distressed homes. Investigators said the perpetrators claim to be immune from prosecution because they file the deeds under the guise of a religious order known as the Sovereign Solomon Brothers Archbishop Corporation Sole.

Herron, who was ordered held on $40,000 bail by Judge David Szumowski, is also known as King Solomon II, according to Coyne. "He's part of the sovereign movement, which doesn't recognize government authority," Coyne said.

Customer Complaints On Loan Modification Firms From Around The Country

The following links are to stories on financially strapped homeowners reporting problems with loan modification companies they hired to help resolve their mortgage problems:

Mansfield, Ohio: More foreclosures means more scams, experts warn. Anson and Michelle Hare were behind on their mortgage payments last spring. Organizations contacted them, vowing to save theme from foreclosure. The Hares responded to one."We had to come up with $900 and had 30 days to do so," said Michelle, 40, of Butler. "Scraping our pennies, we didn't know it was a scam. Their having an attorney made it (seem) legit." Several months passed, and the Hares got the runaround from the mortgage specialist. Nothing was done, and their money was gone. Tracy Bond, a foreclosure prevention advocate with Empowering and Strengthening Ohio's People, said fraud is rampant -- by phone and by mail. She cited a recent example of a scammer claiming to be a staffer with Gov. Ted Strickland's Save the Dream program, who tries to charge homeowners $1,500 for its services.

Souderton, Pennsylvania: On the House: Home-loan modifier was no help. As the mortgage payment grew from $948 a month to more than $1,150, Morissa P. Wiley sought help on the Internet and contacted New Hope Modifications of Bellmawr, which promised to work to modify her loan and save her house. For $1,800 up front. "They kept telling me that everything was OK, that they were working with my lender, and not to worry," she said. "They never called me; I always had to call them, and I started getting suspicious." Shortly after the last reassurance from New Hope, she found a notice that her house was destined for sheriff's sale. "I got on the phone and called New Hope," Wiley said. "I wanted to know if they were really working with my lender or if I should start looking for an apartment for me and my children." Her contact "was always off or out on leave." A supervisor declined to return the money she had sent.

West Sacramento, California: BBB Says Loan Modification Company Is Scam(Roseville-Based Company Issued Desist & Refrain Order). The Better Business Bureau of Northern California is warning consumers about bogus loan modification companies that make empty promises about helping borrowers modify their mortgage loans. The BBB said one such company is ShortRefiNow.Com, based in Roseville. Fourteen people filed complaints with the BBB. They said they paid between $2,600 and $5,300 up front to ShortRefiNow.com to get their loan modified, but the company did not perform or refund their money. ShortRefiNow.com told KCRA 3 by phone it is looking for licensed attorneys to take on their existing clients and they are not taking on any new clients.

Kirkland, Washington: Investigators: Loan mod offers bring even more mortgage troubles. The interest on Della Lorenzen's adjustable rate mortgage was about to soar and her payment on her home in Roy was about to balloon by $500 a month. Then MCA Consulting of Kirkland called and offered to negotiate a loan modification with her bank. [...] "I don't believe they had any thoughts of helping me at all," Lorenzen said. Lorenzen says MCA refused to refund her $3,500 fee and says her home is now on the brink of foreclosure. [...] A state license is required to perform loan mods and regulators confirm MCA is under investigation for unlicensed work. Lorenzen was required to pay her fee up front, which authorities say is illegal and a big red flag.

Fresno, California: Foreclosure Fraud, Phony "Rescue Firms." After years of renting, the Mizer family bought a house in 2005 for nearly 88-thousand dollars. Two years later, Kari and her husband Roger saw the rate on their adjustable mortgage shoot up way beyond what they could afford. They looked for refinancing from more than 40 lenders with no success. Then they got a letter from a mortgage restructuring firm that claimed to have a "95-point-5 percent resolution success" rate in stopping foreclosures. The company charged more than 13-hundred dollars upfront and said it would handle everything. But the Mizers say that's the last they heard. A month later their bank started foreclosure proceedings, telling them it had never been contacted by the company.

State High Court Orders Pennsylvania Attorneys To Ante Up Add'l $25 In Registration Fees In Support Of Legal Aid System

The Administrative Office of Pennsylvania Courts announced:

The Pennsylvania Supreme Court [Thursday] ordered a $25 increase in the annual registration fee for Pennsylvania lawyers, the first such adjustment in eight years. Funds from the increase are to be used for legal aid programs to assist individuals unable to afford legal services.

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Chief Justice of Pennsylvania Ronald D. Castille said the fee increase in its entirety will be used to bolster the Interest on Lawyers' Trust Account program, known as IOLTA, which distributes funds for civil legal assistance to Pennsylvanians unable to afford lawyers. [...] Since mid-December when Federal Reserve rates dropped nearly to zero, IOLTA's revenues have fallen to critically low levels. Similar programs in other states are experiencing the same problem with the result that legal aid programs across the nation are being cut back. At the same time, growing numbers of indigent people with legal problems are seeking legal help.

Foreclosure Mediation Begins To Takes Hold On Staten Island

On Staten Island, New York, the Staten Island Advance reports:

[A] new state law that went into effect late last year is changing how courts handle the foreclosure crisis by requiring judges to schedule mandatory settlement conferences between lenders and homeowners who received subprime and exotic mortgages -- the kinds of loans that triggered a national and global economic crisis. Legal Services of Staten Island provides counseling for homeowners who can't afford to bring an attorney to the foreclosure conference, and the Richmond County Bar Association has offered help.

***

"We are now dealing with this problem as soon as the [foreclosure] case is filed," said Justice Philip G. Minardo, administrative judge for Staten Island state Supreme Court, whose office has scheduled about 200 conferences since starting the process in January. "The court can't force a settlement but the court's presence can assist in bringing the parties together in an attempt to reduce the large number of foreclosures on subprime mortgages."

Thursday, April 02, 2009

A ban on foreclosure sales and evictions from houses owned by mortgage giants Fannie Mae and Freddie Mac, which began as a high-profile effort just before the holidays to keep people in their homes as the government tried to come up with homeowner rescue plans, is over.

Spokesmen for Fannie Mae and Freddie Mac confirmed the ban ended March 31, in a response to an inquiry from TWI. The agencies made a major announcement in November to roll out the ban, garnering headlines and extensive news coverage. Freddie Mac CEO David Moffett issued a statement at the time, saying the ban “provides a new measure of certainty” to families facing foreclosures during the holidays.

But its expiration didn’t seem to merit the same level of fanfare, with some housing advocates caught by surprise, scrambling for information today and Wednesday on listservs and in phone calls.

Police say imposters with a forged driver's licence stole Lana Morrison's home-ownership title to get a loan. Then the thieves defaulted on the loan.(1) Now, despite a pending fraud trial, a Toronto trust company wishing to recoup its money is trying to evict Morrison and take her house. The local sheriff has ordered Morrison out within two weeks, along with her 12-year-old boy, Tyrone, and their pet poodle, Peanut.

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In April last year, in connection with the case, police laid fraud charges against two women and a man. On May 1, the Durham Region land titles department issued a notice saying "no dealings be had with the property" until the fraud case is settled.

Two months ago, Home Trust Company went to court to seize the property anyway and the judge granted the request, the company's lawyer, Amanda Jackson, said in an email. Morrison failed to appear, Jackson said. Morrison said she was given the wrong court address and arrived 20 minutes late.

Home Trust president Nick Kyprianou said he does not believe Morrison's hard-luck story and is not prepared to await the outcome of the fraud trial. "We can't put ourselves in a situation to lose money – interest is accruing," he said of the mortgage loan. "This could take five years."

In other "north of the border" deed theft stories from The Toronto Star, see:

Man, 90, off hook for loan: Court(Landmark ruling lifts $300,000 burden) ("The decision is the first of its kind in the province since a landmark Court of Appeal ruling [...]. That decision found that even a bona fide purchaser can't legally buy property from a fraudster.");

Judge chides bank in mortgage fraud(Couple's identity stolen, home lost; TD not 'innocent victim,' judge says) ("Ontario is experiencing a "serious mortgage-fraud plague," says a judge who released a blistering decision [...] that chastised the Toronto-Dominion Bank for failing to detect a scam that left a North York couple without their home.").

(1) Nadia Kelly, 27, Antonia Pasculli, 48, and Christopher Dewsbury, 29, face charges of fraud, conspiracy to commit an indictable offence and charges related to forging documents in connection with the case. Pasculli faces further charges including possession of a counterfeit mark. Dewsbury is also charged with forgery, intimidation and attempting to obstruct justice. DeedGammaTheft

The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and notary public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members' creditors.

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Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 [...].

Attorney General Edmund G. Brown Jr. and the Contractors State License Board (CSLB) have finalized an agreement that will stop a massive service and repair scheme that unfairly overcharged thousands of Californians for "shoddy and woefully inadequate" home repair work. [...] A months-long investigation by the Attorney General's Office and the Contractors State License Board found that SRVS Charge Inc. and its affiliated companies had been cheating some 6,000 customers each year for overpriced and substandard home repair work since 1989.(1)

***

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of ending their scheme, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption. As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County district attorney's offices.

New Wisconsin Law To Reduce "Tenant Blindsiding" In Foreclosure Actions

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:

[A] new state law passed as part of the recent budget adjustment bill now protects the rights of tenants during foreclosure. The law requires that landlords provide a written notice to tenants or prospective tenants when foreclosure action begins, and again when the deadline expires for the landlord to pay to avoid foreclosure.

Reportedly, the law, which went into effect March 6, affects foreclosures started after that date and also requires:

Banks and financial institutions to provide written notice three times to current tenants of the property in foreclosure: when the foreclosure action begins, when the court issues a judgment of foreclosure and when the property is put up for sale. Failure to provide notice carries a $250 fine plus attorney fees.

Tenants may stay in their rental residence for up to two months following the sale of the foreclosed property.

If there is a security deposit, the tenants can withhold rent and let the security deposit cover the last month before the foreclosure redemption period expires. That's the time allowed for a property owner to stop the foreclosure from moving forward, a period that generally lasts from six to 12 months.

Foreclosures do not only affect the folks who lose their homes, but more and more, neighbors are also taking the brunt of a home lost on their block. They're having to pay extra in association fees. And in most cases, they have very few, if any options. For the folks living in the Shakerwood community, in Wellington, higher HOA fees have skyrocketed in recent months. Residents there are having to pay $230 more, and there are multiple reason for the fee hike. The neighborhood consisting of 92 homes, has 25 to 30 of those homes empty. That means less people to pay association fees.

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Contractually, a bank does not have to pay association fees once foreclosure proceedings have been filed. But residents still have to pay. "When a bank is in foreclosure it's not paying assessments... It's not obligated to pay assessments... So therefore, it's in the banks best interest to drag out the foreclosure as long as possible," said David Karpinia, an attorney with the Becker & Poliakoff Law Firm.(1)

For more, see HOA Fees Skyrocketing(More foreclosures are forcing many homeowners to cough up more cash when paying for homeowners association fees).

Wednesday, April 01, 2009

A Lawrence County man is trying a new strategy to save his home. Mark Strohecker, of Ellwood City, is a former firefighter who is on disability. When his adjustable rate mortgage jumped, he was unable to make payments. Facing foreclosure, he used a strategy promoted by a Florida-based website called the Consumer Warning Network. He filed a motion asking the lender to "produce the note." "Provide to me the promissory note to show to me that they are indeed the rightful owner of my property here," Strohecker said.(1)

***

Strohecker tells KDKA his lender has told him they can't find the note. It's unclear what will happen next. He plans on filing more paperwork in court next week.

[T]he fight for Strohecker’s home is not over yet. The Judge’s order delays the foreclosure sale until May 13th. The order gives the plaintiff, LaSalle Bank National Association, time to come up with the original note, or, if it was lost or destroyed, to prove that LaSalle is the rightful owner of the note. The Judge’s order cites a potential loan modification as a reason for stopping the Sheriff’s Sale. “Said sale is stayed until the next sale scheduled for May 13, 2009, as there is the strong possibility of federal relief for mortgage foreclosures,” Judge Cox wrote in his order.

(1) For those in Mr. Strohecker's position, it might be a good idea to request that the mortgage company prove, not only that it has the note, but that it also has the legal right to enforce the note through foreclosure by demanding that it produce, among other things:

a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage;

all necessary affidavits, powers of attorney, etc. that impact on the validity of the written assignments of mortgage;

Sherrita Richardson’s home was to be taken in foreclosure on Monday, making her just one more American caught in the nation’s widening foreclosure crisis. Instead, Richardson became a rare statistic. She’s won a reprieve. The lender has stopped the foreclosure to investigate Richardson’s claims that she was the victim of an inflated appraisal and fraud.

***

Richardson has been assisted by retired attorney Sid Willens, who lobbied the lender to stop the foreclosure until her claims could be investigated. [...] What’s more, Willens has filed a lawsuit against the mortgage broker and seller. She said they misled Richardson and committed a fraud in the deal, using an inflated appraisal and misrepresenting how much money she would put into the deal.

While FHA serious delinquencies have soared since last summer, nowhere is that more true than in Florida, at least according to the Monthly Report to the FHA Commissioner for January (released last week). Of the 50 metro areas with the highest default rates in the FHA’s Single-Family Mortgage Program in December 2008 (the latest data shown in the report), 14 were from Florida – with five Florida metros making the top-ten list.

***

While plunging home prices and a sharply deteriorating economy were behind much of the horrible performance of FHA loans in Florida, there appears to be something else going on: sloppy underwriting, and probable fraud. Reports of sharply increasing early payment defaults (where borrowers either make no or just one payment before defaulting) are apparently heavily concentrated in Florida [...].

Florida AG: Mortgage Fraud Crisis Like A "State Of Emergency"

The Tampa Tribune reports:

As more Floridians face losing their homes to foreclosure, more crooks emerge to take advantage of them, and the state's attorney general says the problem has become a crisis. [...] "This mortgage fraud crisis is similar to a state of emergency. It will take an all-hands-on-deck approach between our state's agencies to effectively address our citizens' concerns," McCollum said. Mortgage fraud topped the list of complaints logged by his office in 2008, and the state has pursued civil and criminal action against dozens of companies and individuals accused of mortgage fraud. [... Mortgage] Rescue fraud continues to be the top mortgage fraud complaint by homeowners. Many say companies are taking their money and not helping them modify their mortgages.

Ohio Attorney General Richard Cordray's Ohio Organized Crime Investigations Commission announced today the indictments and arrests of two men alleged to have perpetrated one of the largest mortgage fraud schemes ever in Franklin County. John Wanek, 55, of Phoenix, Ariz., and Robert Swanigan, 30, of Mesa, Ariz., were indicted Friday by the Franklin County Grand Jury and were arrested Monday in Arizona.

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The indictment charges Wanek with 33 counts, including engaging in a pattern of corrupt activity, theft, forgery, telecommunications fraud, money laundering, and receiving stolen property. Swanigan is charged with theft and falsification. [...] Investigators report that in the past six years Wanek obtained commercial loans in the Columbus area through the use of false statements and forged documents. Wanek obtained loans for the purchase of six Columbus apartment complexes and one Indianapolis apartment complex. Wanek then defaulted on the loans.

Tuesday, March 31, 2009

State Atty. Gen. Jerry Brown pledged Saturday to investigate and prosecute businesses that charge struggling homeowners fees to help get more favorable terms for repayment of their mortgage loans. "We have lawyers, we have investigators, and we will go after those who break the law by falsely representing what they can do," Brown said at a congressional hearing in South Los Angeles.

Brown, a Democrat planning to run for governor next year, vowed to focus specifically on bogus television ads that lure homeowners into expensive mortgage consulting deals that are useless. "We will document the rip-offs that are over the mass media as best we can," he said.(1)

(1) Unlike his counterparts in some states who are prosecuting loan modification foreclosure rescue fraud with civil lawsuits, Attorney General Brown has recently been bringing criminal actions against the alleged perpetrators charging grand theft and criminal violations of the state's foreclosure consultant statute. See:

Lenders Abandoning Foreclosure Actions In Some Markets; Dilapidated Collateral Not Worth Repossessing; Homeowners Left On The Hook For Code Violations

In South Bend, Indiana, The New York Times reports:

[C]ity officials and housing advocates here and in cities as varied as Buffalo,(1) Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.(2)

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan.(3) The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.(4)

(1) According to the story, in Buffalo, where officials said the problem had reached “epidemic” proportions in recent months, the city sued 37 banks last year (see City of Buffalo v. ABN Amro Mortgage Group Inc., et al.), claiming they were responsible for the deterioration of at least 57 abandoned homes; the city chose a sampling of houses to include in the lawsuit, even though the banks had walked away from many more foreclosures. So far, five banks have settled.

(2) Reportedly, Chuck Leone, the South Bend city attorney, made this observation on the foreclosing lender walk-aways: “We see it one of two ways. One is that the bank will simply dismiss the foreclosure complaint. The other is that the mortgage holder will follow through and take a judgment of foreclosure, but then not schedule the property for sheriff’s sale.”

(3) The article highlights the story of one local property owner who though she lost a two-family rental home to foreclosure, which fell victim to looters after her tenants moved out. The City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name. Reportedly, the home is now so worthless the city plans to demolish it — another bill for which she will be liable.

(4) One recent story (see National Public Radio: Banks Refusing To Take Back Foreclosed Properties) reported that Cleveland, Ohio Housing Court officials said they are now seeing homeowners take matters into their own hands when dealing with the abandonment of foreclosure lawsuits by lenders. One instance is cited involving a foreclosing lender that was reluctant to complete the foreclosure process and repossess a dilapidated property. In that case, the homeowner simply deeded back the property to the lender by preparing a deed, naming the lender as grantee, and recording it.

Such a conveyance may ultimately be found to be ineffective because the mortgage lender surely would assert that it never "accepted" the deed conveyed by the owner of the dilapidated wreck collateralizing its loan (ie. to be effective, a deed must be both "delivered" by the grantor-owner, and "accepted" by the grantee-lender; in other words, no acceptance = no conveyance). However, recording a deed in the name of the unwitting lender may, under state law, create a legal presumption that it has been "accepted" by the lender (see Janian v. Barnes, 284 A.D.2d 717, 718; 727 N.Y.S.2d 182 (N.Y. App. Div. 3d Dep't 2001)) until such time that it straightens out the mess by going into court, presenting evidence to a judge that there was no actual acceptance, and obtaining a judgment declaring the deed to be void. Unless and until it does so, it could arguably be treated as the legal owner of (and find itself legally responsible for the code violations on) its abandoned dilapidated loan collateral. Inasmuch as many mortgage holders, their loan servicers, and their assembly line foreclosure mill attorneys have proven themselves to be quite clumsy when handling the paperwork relating to their mortgages, it could be quite some time before they discover that title to the loan collateral has been put in their name - probably when they start getting tagged with the code violations - and possibly even longer before they figure out what to do. responsibility code violations foreclosure

A Sherman woman has been arrested in connection with an alleged real estate fraud scheme, including trying to sell property she did not own and conducting a mortgage rescue scam, authorities said. Tamptha S. Hickman, 39, turned herself in to police after a warrant for her arrest on a charge of felony theft was issued Tuesday. She was released from jail after posting $1,000 bail.

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Under her company name, police said, Hickman mailed out as many as 500 letters to homeowners who were in the foreclosure process and claimed she could help save their homes at no cost to them. One homeowner who got the letter contacted Hickman, who allegedly told the homeowner that she had contacted the victim’s mortgage company and that if she wrote Hickman a check right away for $3,800, the home would not be foreclosed upon. Hickman then would negotiate a payment plan for the rest of the debt, she allegedly told the woman. The victim gave the check to Hickman and a week later contacted the mortgage company to make sure the payment had been made. It hadn’t been, police said. Authorities believe Hickman pocketed the money.

The victim never went to authorities about Hickman’s alleged scam, but police found her after going through Hickman’s financial records. “The victim never came forward because she was embarrassed and didn’t know there was anything she could do about it,” Hill said.

Real Estate Agent Charged In Staten Island Gas Station Heist; Used Phony Deed To Transfer Title To Client's Business Property To Son, Say Cops

The following excerpt appeared in a recent NYPD Daily Blotter column in the New York Post:

A real-estate agent was busted after he tried to steal a million-dollar Tompkinsville property from the owner, sources said. Mike Odeh, 53, was hired by the owner to sell a gas station on Bay Street and Hannah Street, the sources said.

The owner changed his mind about the sale and notified Odeh, but the agent allegedly forged a phony deed and on Feb. 17 filed it with the County Clerk's Office, police said. The phony deed transferred the property to Odeh's son, who tried to sell the property for $300,000, cops said. The property is worth about $1.5 million, according to court papers.

The owner learned of the scheme from another agent, and cops arrested Odeh at his Grasmere home Thursday. He was charged with grand larceny and criminal possession of a forged instrument.

Buried at the end of a New York Law Journal article on a new volunteer attorney initiative to assist unrepresented defendants in civil cases [credit for the idea for this program attributed to former New York Court of Appeals' Chief Judge Judith S. Kaye](1) is this excerpt on the state of publicly funded legal aid and pro bono services in New York:

In a report earlier this month, the Office of the Deputy Chief Administrative Judge for Justice Initiatives termed the supply of publicly funded legal aid and pro bono services "entirely inadequate" to meet the need. In 2007, Kaye estimated that about 1.8 million litigants appeared without a lawyer in New York state courts.

(1) In an interview Wednesday, Kaye said she had been thinking of ways to bring the "regrettably increasing supply side of lawyer time" caused by the failing economy to the "aid of the regrettably increasing demand side" of people needing legal services. "I am so heartbroken every day to read the lead news item in the [New York] Law Journal about more lawyers being suspended, exited, encouraged to do something other than their law firm work," Kaye said. "And there are the courts just flooded with foreclosure cases, flooded with credit card debt cases, flooded with Family Court filings."

Monday, March 30, 2009

Miami Feds Bag 10 Suspects In Alleged Cash Back Mortgage Fraud Scam; Another Remains At Large

In Miami, Florida, the South Florida Business Journal report:

Eleven South Floridians have been indicted in a mortgage fraud scheme totaling more than $4.7 million, according to the U.S. attorney for the Southern District of Florida. Ten of the defendants were arrested last week;(1) the 11th, identified as Julissa Amaral of Miami, remains at large. The defendants are alleged to have set up 13 fraudulent sales of homes involving six different South Florida properties between August 2004 and September 2008.

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It is alleged that, at the closing of the sales, the 11 would then resell the property to other straw buyers, each time significantly increasing the price of the properties. [The two alleged ringleaders] then would divert the proceeds from the sales for their personal use, according to the indictment. The straw buyers never lived in the property, nor paid any of the closing costs or mortgage payments. Once the loans closed, five of the six properties went into foreclosure. It is estimated the losses on the six properties were $1.6 million.

(1) Juan A. Garcia and Yenisley Acosta, both of Miami, were the alleged ringleaders, according to the indictment. The other defendants, alleged to have posed as straw buyers, applying for loans using false information in their applications, according to the indictment, are identified as Juan J. Garcia, of Hialeah; Omar Alfonso, of Hialeah Gardens; Yurima Espinosa, of Miami; Yolanda Gomez, of Hialeah Gardens; Ulises Avila, of Miami; Luis Cordero, of Miami; Roberto Portilla, of Miami; Julissa Amaral, of Miami; and Eugenio Garcia, of Miami.

Investors considering the purchase of residential mortgage loans should include on their diligence checklists verifying the mortgage loan documentation to ensure they will be in a position to enforce the Note and realize on the mortgage if necessary. This entails making sure there is a proper negotiation of all Notes in accordance with UCC requirements, obtaining physical custody of the original Notes, and obtaining written assignments of mortgages in recordable form.

The article highlights the following issues that investors can expect to be raised if they fail in their due diligence:

[O]ne issue that has become an increasing focus of litigation between residential mortgage lenders and borrowers is the adequacy of the "paper trail" of mortgage loan securitizations. [...] Consumer lawyers around the country have sought to capitalize on the inability of some mortgage servicers and foreclosure counsel to adequately "prove up" the mortgage loan documentation to prevent or delay foreclosure of defaulted loans.

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The principal points of contention have been, first, whether possession of the borrower's original promissory note is a prerequisite to exercise of foreclosure remedies; and, second, whether the foreclosing creditor must show a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage.

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Increasingly, at the urging of debtors and debtor's counsel, state courts and in particular bankruptcy courts presented with motions for relief from the automatic stay to foreclose defaulted residential mortgage loans are requiring creditors to produce original Notes.

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A related issue concerns who is entitled to enforce the Note. It has been held that "[i]f a loan has been securitized, the real party in interest is the trustee of the securitization trust, not the servicing agent." In re Hwang, 396 B.R. 757, 767 (Bankr. C.D. Cal. 2008). Enforcement and foreclosure proceedings are often brought by the loan servicer, sometimes in its own name and sometimes in the name of its principal pursuant to a power of attorney. Any claimant who is not the "holder" of the Note within the meaning of the Uniform Commercial Code and in actual physical possession of the Note may find its standing challenged by borrowers and courts.

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The other principal line of attack by borrowers and their counsel concerns the validity of written assignments of mortgages.

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Another complication concerns the role of MERS-- the Mortgage Electronic Registration System, Inc. MERS was established to maintain an electronic off-record mortgage registry, thus eliminating the need for filings in the public land records whenever a mortgage changes hands.

Court Orders Temporary Shut Down Of Miami Loan Modification Firm; Company Directed To Refund Upfront Fees Within 90 Days

From the Office of the Florida Attorney General:

Attorney General Bill McCollum [Friday] obtained a temporary injunction against Lincoln Lending Services, LLC and owner Rita Gomez, prohibiting the company from engaging in any type of consumer-debt related service or mortgage modification service and from taking payment from consumers for such services until further order of the court. The company will also be required to preserve and allow inspection of its records and refrain from liquidating its assets.

In addition to freezing the company’s assets, the order requires that the company refund any up-front payments made by consumers for foreclosure-related rescue services subsequent to October 1, 2008, the effective date of the law prohibiting up-front charges.

These refunds should be completed within 90 days and will be made without the necessity of consumers filing a claim. The Attorney General's Economic Crimes Division sued Lincoln Lending and Gomez [last] week (press release, lawsuit) for allegedly charging up-front fees for loan modification services in violation of the Foreclosure Rescue Fraud Prevention Act. The Attorney General’s office has received hundreds of complaints regarding this case since the lawsuit was filed. Both parties agreed to this order.

Ex-Subprime Mortgage Peddlers Now Running Loan Modification Scams

Bloomberg News ran a lengthy story describing how loan modification scam artists have popped up all over the country. Many of the players are described as out-of-work real estate professionals who peddled subprime mortgages during the boom who are now pocketing hundreds of thousands of dollars in advance fees and disappear or bleed their victims by charging monthly payments. The following excerpt describes one mortgage broker who jumped on the loan modification bandwagon and who now finds herself in hot water:

In early 2008, Cheryl Ann Montero, a California mortgage broker, held a series of free seminars [for homeowners facing foreclosure] in the clubhouse of the Lone Tree Golf Course in Contra Costa County, a suburban area near San Francisco. [...] She said her firm, Freedom Financial Solutions, could pressure lenders to stop foreclosures by challenging the legality of loan agreements, according to court records. Her fee: $2,500 upfront and a $2,000 monthly payment to cover legal costs. Promoting her services on the Web site Craigslist, Montero, a blond-haired, blue-eyed woman who looked like a soccer mom, became known as a foreclosure escape artist.

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She was also ripping people off, says Ken McCormick, a prosecutor in the Contra Costa County District Attorney’s office. A player in a new confidence game exploiting soaring defaults, Montero didn’t have a team of attorneys to confront lenders. Instead, her firm took a small ownership stake in some of her clients’ houses and filed for bankruptcy, temporarily suspending foreclosure proceedings on those homes, according to an investigative report filed in court by prosecutors.

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“She couldn’t make it in real estate anymore, so she just changed hats,” McCormick says. “But she was taking money and doing nothing.” The prosecutor charged Montero with 36 counts of grand theft and related charges in December. She pleaded not guilty and is free on $100,000 bail.(1)

(1) According to the story, Montero ran a three-person operation in which she told homeowners that she could find technical violations committed by lenders in loan contracts, an investigative report filed in court says. Montero blundered during one of her seminars by dropping the name of an attorney who she claimed was working with her, the report says. One of Montero’s clients called the lawyer, who had never heard of Montero, and he in turn complained to the authorities. “That’s what gave us a heads up,” says McCormick, the prosecutor.

A recent op-ed column in the Atlanta Journal Constitution by William J. Brennan Jr. of the Atlanta Legal Aid Society, the founder and director of Atlanta Legal Aid’s Home Defense Program, makes an observation on a weakness in Georgia state law in connection with the enforcement of lending and consumer protection laws:

Many consumer advocates support the lending law revisions in Senate Bill 57, but the changes are window dressing for those of us who represent poor people faced with foreclosure. The law falls short in one crucial area — assignee liability.

Assignee liability entitles a bilked borrower facing foreclosure to sue not only the originator of the loan but also the current holder. It’s important because most loans are sold and transferred into mortgage-backed security pools. SB 57 doesn’t mandate assignee liability, which means that homeowners would be left with no clear recourse.

Sunday, March 29, 2009

Tulsa Bar Response To Call To Ante Up Financial Help For Legal Aid Underwhelming As Governor, Others Attempt To Bridge "Justice Gap" In Oklahoma

In Tulsa, Oklahoma, an op-ed column in Tulsa World reports:

Two hundred Tulsa law firms that had not contributed to Legal Aid Services of Oklahoma in past fund drives recently received an appeal to help match a $35,000 challenge grant from the George Kaiser Family Foundation. So far, response is underwhelming; four firms dug deep and gave a total of $1,000. The annual public fund drive continues, led by Gov. Brad Henry and first lady Kim Henry.

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[I]f this were a typical year — LASO again would serve 20,000 clients, who could not otherwise afford a lawyer to aid them with civil legal matters. And LASO again, lamentably, would turn away another 20,000 Oklahomans because it did not have enough staff to get them past the front door. Even in good times demand far outstrips resources. "We call it the 'justice gap,' " says LASO's Gayla Machell. "They're all the people who cannot afford an attorney's help but cannot make it to the front of the line at Legal Aid."

This, however, will not be an ordinary year. Here and nationally Legal Aid groups are witnessing crushing demand. LASO staff across the state can only hope that the number they must turn away remains at 20,000 because the figure could go far higher.

The Utah Attorney General's Office [Friday] charged the CEO of Utah Financial Inc., Midvale, Utah, and his wife with 18 second-degree felony counts for allegedly running a lucrative mortgage fraud scheme. Utah Financial President Brendan Tyler Cassity, 36, and Olivia Cassity, 29, were both charged with 15 counts of communications fraud, one count of racketeering and two counts of money laundering.

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According to court documents, the Cassitys allegedly prepared their own appraisals using the name of a separate licensed appraiser and substituting photos of more lavish homes as part of those appraisals to inflate the value of the real estate described in those appraisals. They then allegedly used straw buyers to obtain loans far in excess of the true value of the properties. Equity was then allegedly skimmed from the properties in order to gain tax advantages and buy other properties. The alleged scheme may have netted several million dollars. The Attorney General's Office has asked a judge to freeze the assets of the defendants and is seeking criminal forfeiture of their business at 193 East Fort Union Boulevard in Midvale and their home in Salt Lake City. Prosecutors are also asking that bail be set at $500,000 for each defendant.(1)

(1) "The ripple effect of mortgage fraud schemes across the country is far-reaching and significant," says Attorney General Mark L. Shurtleff. "The Utah Attorney General's Office places a high priority on uncovering and squelching predatory practices of unscrupulous mortgage brokers. Some of these so-called ‘mortgage assistance' programs are merely schemes to defraud people of their money and their homes."

Administrators of New York courts rolled out a new program Thursday to enlist attorneys, many of whom may be laid off or on reduced work schedules due to the sour economy, to provide legal advice and expertise to pro se litigants. The initiative will differ from traditional pro bono work in that lawyers will not represent poor clients in court nor provide assistance throughout their cases.

Rather, lawyers in the new Volunteer Attorney Program will make themselves available to multiple pro se litigants to help them prepare petitions and other court paperwork, advise them about what might happen in court and interpret orders from courts, Chief Administrative Judge Ann Pfau said.(1) The program at first will focus on providing legal services in courts in New York City and in Westchester, Suffolk and Nassau counties.

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Free training will be available, and attorneys will earn CLE credit for volunteering under the program, according to court administrators. [...] Lawyers in the program will be shielded from liability for the advice they dispense under §17 of the Public Officers Law, according to Lawrence Marks, director of administration for the Unified Court System.

(1) According to the story, Pfau said the need for attorneys to help pro se litigants is particularly acute in cases that reflect the bad economy, such as foreclosures, tenant-landlord disputes, personal debt, child support and other matters in Family Court and small estate settlements in Surrogate's Court. Both employed and unemployed lawyers can participate, Pfau said. Applications and other information about the program are available on the Unified Court System's Web site:

Court officials will give examples of the types of matters where attorneys can provide legal advice and volunteering lawyers can express preferences for counties where they want to serve. There is no minimum time commitment.

In a recent column appearing in The Herald News (Fall River, Massachusetts), foreclosure defense and bankruptcy attorney Glenn Russell Jr. writes about one problem facing lenders in some foreclosure actions that has gone pretty much unnoticed in general media reports - What happens if a sloppy loan originator and/or title closer obtained only one spouse's signature on a promissory note and mortgage in connection with property owned by husband and wife jointly as tenants by the entirety?

If your lender is seeking to foreclose on your home, and you live in a state like Massachusetts that recognizes a type of property ownership known as “Tenancy by the Entirety,” you have some protection.(1) Both spouses’ signatures are required to be on all of the loan and property documentation when you purchased your home.

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During the mortgage frenzy over the past 7 years, mortgage brokers could not keep up with the paperwork and became very sloppy, or worse. Many times, these people were in too much of a rush, and lacked the necessary knowledge about this issue, to even ask for both signatures.

(1) According to Russell, tenancy by the entirety is recognized in 28 states, including Massachusetts. In most cases the foreclosing lender will not be able to foreclose and sell your property, but will be able to place a lien on the property equal to the spouse’s share who did sign the loan documents, as long as the couple remains married and alive. He goes on to point out, however, that this share is only a “contingent” interest, meaning that the lender would only take actual ownership of the property if the non-signing spouse pre-deceased the signing spouse. If the married couple divorce, the lender can proceed with the foreclosure process.

I would add to this point by observing that in the State of Florida, a mortgage on a primary residence (ie. homestead property) signed only by one spouse (irrespective of how title is held) is treated as null and void pursuant to the provisions of Article X Section 4 of the Florida Constitution (relating to the state homestead exemption from forced sale) and the state court interpretations thereof. In that case, the foreclosing lender will find itself having no recourse at all against the property and, accordingly, will be left holding the bag.

While I have yet to see specific recent cases recounted in general media reports on incidents where only one spouse signed the note and mortgage on property owned as tenants by the entirety that is facing foreclosure, anectdotes thereon are definitely out there. ThetaMissingDocsMtg

Now that a lawyer has been arrested in connection with a bizarre real estate fraud that allegedly recruited straw buyers at a dominatrix club, he has standing to challenge the warrant that authorized a raid on his law office last month, his attorney said Thursday. It is "dangerous precedent to allow a prosecutor to do this in an adversarial system to a lawyer," said Kathy B. Huang, the Manhattan attorney representing George O. Guldi, 55, a former Democratic legislator and Westhampton Beach, N.Y., solo practitioner.

Customer Complaints On Loan Modification Firms From Around The Country

The following assorted links are to stories of financially strapped homewowners complaining about being screwed out of upfront fees paid to loan modification companies for allegedly worthless promises.

Las Vegas, Nevada: Woman evicted after home is foreclosed on. One woman is putting a face on the foreclosure crisis. Evicted from her home Wednesday afternoon with nowhere to go and making matters worse, she says she tried everything to get the bank to work with her. That includes hiring a man who is now facing felony theft charges. But still, the constable showed up at her door. She and her husband are former clients of Jack Ferm, the owner of the infamous U.S. Justice Foundation. Carrie paid him $1,900 because she says he promised to help renegotiate their loan. Instead, Ferm was recently arrested and charged with felony theft.

Pleasant View, Tennessee: Woman Bilked By Foreclosure Relief Program(FTC Shut Down Company Last Month). Heather Means is a newly divorced mother of two. When she got behind on her mortgage payments, a letter from National Foreclosure Relief sounded perfect. She paid them $1,000 and never heard from them again. Neither did her mortgage company. She isn't the only one who has had trouble with National Foreclosure Relief, Inc. The Federal Trade Commission shut down the California company last month. The FTC said "many consumers who retain NFR's services ultimately lose their homes to foreclosure."

Oklahoma City, Oklahoma: Scammers Prey On Troubled Homeowners(Group Shares Name With Legitimate Mortgage Help Network). Lori Marderosian said she gave cash to a mortgage consultant who claimed to be from a government-approved network called Hope Now. "I gave him $1,800," she said. "I waited for phone calls, which never came." After five months, Marderosian said she heard nothing and discovered that the Web site had disappeared. She said that even though the site had called itself Hope Now, it wasn't affiliated with the real company of the same name. There have been plenty of complaints about the company that called itself Hope Now. The New Jersey Attorney General's Office filed a lawsuit charging that it used deceptive conduct and charged up-front fees. The FTC has followed with its own lawsuit and obtained a federal court order to stop the company from doing business.

Fort Worth, Texas: Local couple fall victim to alleged scammers. In early March, the 31-year-old man and his 27-year-old wife tapped a Houston company to renegotiate their home loan. They provided all the personal information requested by the firm. But a few weeks later, when they tried contacting the company, its phones had been disconnected and its Web site had been taken down, according to a report the couple filed with police on March 16. Similar to the police report that he and his wife filed, complaints against Excel Loss Mitigation have come in from the Texas cities Grand Prairie, Temple and Pasadena, said Monica Russo, an investigator for the Better Business Bureau in Houston. Russo said eight complaints lodged with her office this month accuse Excel Loss Mitigation of bilking struggling homeowners out of $700 to $1,500 each. Eight complaints are a lot, but the number of actual victims is probably much higher, she said. "For every one complaint, there’s 20 others we never hear about," Russo said.

Houston, Texas: Company Claims It Can Stop Foreclosure. Some homeowners facing foreclosure turn to a Houston company called Excel Loss Mitigation for help. But after paying to have their home loans modified customers find the company gone and it's owner denying any involvement. The website for Excel Loss Mitigation is gone, phone numbers are disconnected.

CBC News: Betrayal of Trust (A CBC investigation reveals how lawyers across Canada have misappropriated and mishandled clients money, to the tune of tens of millions of dollars, or sometimes even charging vulnerable people top dollar for shoddy services)

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